Mehen: Fiat-backed Stablecoin USDM

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Mehen: Fiat-backed Stablecoin USDM

$193,660.00 _Requested

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Community Review Results (1 reviewers)

Impact / Alignment

Feasibility

Auditability

ソリューション

Mehen is working with the community to build a Cardano Native Asset stablecoin, USDM.

USDM uses stablecoin best practices: fully-backed 1:1 with high-quality, liquid, transparent, audited USD assets.

Problem:

Cardano DeFi adoption is slow due to no stablecoin diversity. Cardano only has algorithmic stablecoins and needs a fiat-backed option for those who prefer that or need a direct-to-fiat bridge.

Yes Votes:

₳ 38,216,763

No Votes:

₳ 30,950,243

Votes Cast:

379

チーム

[IMPACT] Please describe your proposed solution.

The Mehen team is actively building the USDM stablecoin, a Cardano-native token that will be backed 1:1 with $1 of high-quality, liquid assets.

Who is USDM for?

The USDM stablecoin will be minted and redeemed by ordinary people and institutions alike.

Individuals who would like to mint or redeem USDM will need to go through normal identity verification checks, and connect a Cardano wallet to the Mehen DApp. Once connected, they will be able to send USD, and Mehen will mint USDM into the connected wallet.

The same process works in reverse. Individuals will send USDM to their identity-verifed wallet. From there, they can initialize a burn transaction to receive USD in the connected bank account.

Licensing

Mehen is taking a well-travelled path, legally speaking. This is the path taken by premiere fiat-backed stablecoins on other blockchains, and it is the best way to ensure that the USDM token will always be redeemable 1:1 for fiat.

Licensing is an important part of safeguarding our tokenholders' off-chain rights. State licensing officials place a high priority on making sure we can fulfill our obligations to our tokenholders.

Mehen Finance will be open for minting and burning USDM tokens wherever it is licensed and is able to legally operate. Mehen is currently seeking Money Transmitter licenses in a variety of US states and territories, and we are working with partners in the UK and the EU to facilitate licensing in those jurisdictions.

TECHNICAL REQUIREMENTS / CODING DETAILS

Mehen Wallet

Mehen will have to navigate a plethora of laws and regulations, not only from each state in the US, but each country throughout the world. Because of this, Mehen will need to create a 3-signing-key multi-signature Cardano wallet for each user. Two signatures will be required. One signing key will be held by the user, one key by Mehen, and the final key held by a neutral arbitrator.

This wallet will be KYC-verified and used for minting and burning/redeeming the stablecoin.

Through the dApp, multi-signing occurs, and the user experience is familiar. Minting and burning happen transparently for a KYC-approved user.

But this multi-signature setup allows Mehen to comply with court orders, or to lock a mint/burn wallet if necessary to prevent fraud or abuse.

Admin Website and Mehen dApp Details

There will be 2 websites for the USDM stablecoin. The first website is the dApp that customers/users will access to mint and redeem the stablecoin. The second will be an administrative website for the Mehen team.

Admin Website

The admin website will have multiple capabilities to allow Mehen to more efficiently monitor and control the Mehen dApp. There will be various reporting tools available including AWS CloudWatch for anomaly detection. This service can alert Mehen to any irregularities within the system and hopefully allow Mehen to mitigate the issue before it becomes critical.

Other capabilities will allow Mehen to review KYC updates and notifications from the KYC provider, review wallet locks, and allow Mehen to comply with any legal issuance.

Mehen dApp

The Mehen dApp will consist of three separate components, the website, the Mehen back end, and the Drasil back end.

<u>dApp Website</u>

The user website will be fairly simple and straightforward. Its purpose is to allow users to deposit USD from their bank, mint USDM from their USD, transfer USDM to another Cardano Wallet, burn USDM for USD, and withdraw USD to their bank. The user’s transaction history will be viewable to the user, and they will see any KYC or other notifications received for their account. An FAQ section will be built to allow users to work through any common questions or issues from these services. If the user cannot resolve their issue, they will be able to open a ticket via a Contact Us section with Mehen to get the issue resolved.

<u>dApp Mehen Back End</u>

The Mehen back end will handle the KYC integration with the KYC provider and store the KYC data for regulatory purposes. It will also handle the Bank integration along with deposits and withdrawals from the user’s bank. The user's transaction history, notifications, tickets, and profile will also be handled by this component.

Drasil Back End

The Drasil back end will handle the Mehen wallet creation, the minting and burning of USDM, and all Cardano network transaction creation/execution/signing,

dApp and Admin Website Implementation

Tech Stack

List of technologies and libraries to be used for implementing the website:

Multiple Cardano wallet browser extensions (as many as possible)
Cardano Browser Library
Angular
Java
SpringBoot
AWS Cloud hosting and tools (chosen based on developer's experience)
Gitlab (this project will be opensource allowing full transparency and community interaction)
Gitbook
Node.js
Drasil

Revenue

Fees similar to existing exchanges like Coinbase and Binance will be applied for the USDM service. The Fee schedule will be reviewed and determined by Mehen Financial. Fees collected will pay for further development and maintenance of the Mehen dApp.

Future Features

Beyond the scope of this proposal, subsequent targets for development will include (but are not limited to) the following:

Additional languages for the website
Be able to use other currencies for deposit besides USD
Re-using this technology to launch stablecoins in currencies besides USD
Licensing KYC-verified wallets for use in broader regulated applications

[IMPACT] Please describe how your proposed solution will address the Challenge that you have submitted it in.

This project addresses all three success categories listed in "F9: Dapps, Products & Integrations".

Increasing the number of dapps and products available for the community to use that help to enrich the ecosystem with new use cases.

There is no fiat backed stablecoin on Cardano. We have seen Terra die because their algorithmic stablecoin was flawed. Tether, which is supposed to be fiat backed but later was revealed to be partially backed by unsecured debt, depegged from the dollar in 2022 as well (<https://www.cnbc.com/2022/05/12/tether-usdt-stablecoin-drops-below-1-peg.html> ).

USDM will be a true fiat backed stablecoin for the Cardano community, thus completely avoiding all of the pitfalls we’ve seen so far in the crypto space.

Increase the number of integrations that bring existing solutions together for a more seamless and connected experience between different products.

USDM is a native token for Cardano. It will be freely transferrable on the Cardano network, allowing different entities to transact with a stable payment model.

Increased quality of existing products & integrations through suggested improvements that is supported by customer feedback or increased usage by the community.

Dexs and DeFi platforms can rely on USDM as a stable peg to the USD. This will help them secure their investments and bottom line without forcing them to hold actual USD.

[IMPACT] What are the main risks that could prevent you from delivering the project successfully and please explain how you will mitigate each risk?

The main risk would be not receiving funding to create the project in the first place. This project is complex in that there are laws and other legal requirements that need to be followed or there could be legal ramifications for Mehen. Because of that complexity and the risk of legal issues, we need a strong and disciplined development team. Documenting the system requirements, following through with system test plans, secure and robust implementation of the service, and safeguarding our customers’ KYC information will be paramount to our success. Having the funding secured will allow us to retain and even possibly attract the types of engineers required to make this project a success.

[FEASIBILITY] Please provide a detailed plan, including timeline and key milestones for delivering your proposal.

There are multiple milestones for the development and delivery timeline. The capabilities listed for each milestone are high level in some cases. Further breakdown would be addressed during issue creation in the Gitlab repository. The time listed per milestone is in calendar time and not total development hours.

After Milestone 4, the initial capabilities stated in this proposal will be completed. Any development after that time will be considered maintenance and enhancements. Costs associated with this development will be covered by this proposal for the remainder of the first year. After the first year, service fees will be used to cover further development activities.

There will be a Testnet instance where new builds will be tested before being deployed to Mainnet. It is known that one can never fully replicate production in a test environment, however, Software Testing and DevOps best practices will be put in place to help mitigate this.

Milestone 1

Milestone 1 will lead to a CDR for all things related to the Mehen dApp. Some prototyping may be required for integration exploration with Plaid or any other third party service we decide to use

User dApp UI/UX Design
Welcome screen
Information screens (who, what, why, how)
Create text content
Login screen
Profile page
KYC Registration
Decide Plaid modal on FE or Plaid integration on BE
Bank linking
Bank deposit
Bank withdraw
USDM minting
USDM burning
Send/Receive from wallet
Transaction history
FAQ
Contact Us
About Us
User Dashboard
Website Graphics
Admin dApp UI/UX Design
Admin panel user handling
Third party key holders
Mehen DevOps team
KYC alerts
Review wallet locks
Take over a wallet with third party
System Architecture Diagram
Database Selection and Design
System Requirements Documentation
DevOps Planning
Logging and alerting setup
Tool identification
User account CRUD
Should be covered by the selected tool(s)
User Definitions, Roles, and Capabilities
Customer
Mehen DevOp
Mehen Financial (key handling)
Third Party (key handling)
Data Flows
KYC registration
Profile editing
Bank linking
USDM minting
USDM burning
Wallet transfers send/receive
Locking a wallet
Wallet transfer out with third party
Contact Us (need Freshdesk or something like that)
System to user notifications
Milestone Schedule Creation
Critical Design Review

Milestone 2 (2 months)

Milestone 2 will start the actual development for the Mehen dApp.

System/Software Test Plan Documentation
Start of FAQ Creation
Will continue through all milestones, but not listed in all
Web App (Angular)
Skeleton for all pages
Navigation between pages
Welcome Screen
Information screen
Registration
Plaid modal or custom?
Login
Profile
Editing
Deletion
Notifications
Mehen Back End (Java SpringBoot)
Authentication Service
Handle login/JWT creation
Authorization Service
Set roles based on user
KYC Service (Registration)
*TBD if submitting KYC data or FE submits through modal
Receive and store KYC metadata
HandleKYC updates
Profile creation
Persistence Service
KYC CRUD
Notification Service
Drasil Back End
Create wallet for given profile
User key
Mehen key
Third party key
Lock/unlock wallet
AWS
Partial architectural implementation
Enough to test everything to this point
Milestone Integration and Test

Milestone 3 (2 months)

Milestone 3 will focus on being able to link, remove, and use a banking account along with the USDM minting and burning service.

Web App
User Dashboard
Bank linking/removal
Bank deposit/withdraw
About Us
FAQ
Mehen Back End
Banking Service
Bank linking
Bank removal
Deposit
Transfer from user's bank to Mehen
Not minting yet, just moving funds into my account like Coinbase or other exchanges
Withdraw
Transfer from Mehen to user's external bank
Drasil Back End
USDM Minting Service
Create tx and sign
USDM Burning Service
Create tx and sign
AWS
Additional architectural implementation for testing
Milestone Integration and Test

Milestone 4 (2 months)

Milestone 4 will be the final new development for the Mehen dApp. All initially intended functionality will be present and the system will be ready to go live.

Web App
USDM Minting
USDM Burning
Transaction History
Contact Us
Admin Web App
Admin panel user handling
Third party key holders
Mehen DevOps team
KYC alerts
Review wallet locks
Third party key/wallet handling
Mehen Back End
Banking Service
Trigger minting
Trigger burning
Contact Us/Ticket Service
Historical Service
Drasil Back End
Third party key handling for locked wallets
Always be tx out
AWS
Additional architectural implementation for testing
AWS CoudWatch Integration
Milestone Integration and Test

Maintenance mode

Main scope will include addressing user issues and suggestions to increase the usability and robustness of the dApp. However there are other drivers which could trigger additional dApp development. Examples include:
Changes to the known legal framework
Additional language translations to the website as we are granted legal operating ability in countries outside of the US.

Total Development Time: 8 Months

Total Maintenance Time: 4 months

Total Time: 1 year

[FEASIBILITY] Please provide a detailed budget breakdown.

Lead Software Engineer/Full Stack Developer (pre-tax): $50,400

This line item pays for 560 hours of a Lead Software Engineer/Full Stack Developer’s time at a rate of $90/hour. 480 hours are dedicated through Milestone 4. 80 hours are dedicated to maintenance and DevOps after Milestone 4 is completed.